GUEST POST/Real Budget vs Alternative Budget

The Minister of Finance

This guest post is by Matthew S.

Compared to a Dom Mintoff budget (żieda fil-prezz tat-tonn taż-żejt), a Karmenu Mifsud Bonnici budget (state-sanctioned bribes paid by people desperate for a colour television set) and Alfred Sant budgets (the bizarre replacement of value added tax with something called CET) — incidentally, all budgets which the people sitting on the government benches right now supported enthusiastically – the budget presented three days ago is an absolute masterpiece.

God knows Labour had enough time sitting on the Opposition benches to observe how it is done.

This explains the mildly positive reaction. People are just grateful that Labour did not come up with any new outrageous plans But gratefulness that shocks have been avoided is hardly a resounding seal of approval, is it?

Thankfully, the Opposition came up with the novel idea of producing an alternative budget – something which has not been given enough media attention. This gives us the opportunity to compare the budget presented by Minister Edward Scicluna with a budget that a Nationalist-led government would have presented if it were in government.

On close scrutiny, it turns out that the Nationalist Party is ready to properly tackle some of the biggest issues of the modern era: an ageing population (not by putting its collective parents-in-law in state-funded places at Villa Messina), an increasingly vulnerable environment (not by taxing sky-rise towers and giving the spare change to The Arts), and an economy which needs transformation (not by selling passports and putting 10,000 friends, relations and cronies on the public payroll).

Malta’s fertility rate is one of the lowest in the European Union. Maltese people are not having babies, either because they can’t or because they won’t. At the same time, Maltese people are living longer. They’re not having babies but they’re living to 85 or 90 without leaving anyone behind to pay for their pension, healthcare or even upkeep in homes for the elderly.

By 2050 (that’s only 35 years from now), there will be around two people in the workforce for every pensioner. This is clearly a demographic time-bomb, and hostility towards immigrants – as distinct from citizens of other EU member states who come to Malta for a few years and then leave – doesn’t help.

The Nationalist Party wants to help counter this with a second pillar pension, a fund-based system which employers and employees pay into. This is hardly a reinvention of the wheel. The three-pillar pension system was first proposed in 1987 by the Geneva Association, a think-tank. It has been adopted, to some degree, by several EU member states, while others slowly inch towards it.

But Malta’s prime minister continues to insist that there is no need of a three-pillar pension system. Muscat also says that employers and employees cannot afford to pay into one, which is rather odd considering how bullish he is about Malta’s economic performance and people’s ever increasing disposable income.

The Nationalist Party is not alone in wanting the second pillar pension system. A few months ago, Alternattiva Demokratika said that it should be introduced for people who were born after 1963. All the 2016 government budget does about pensions is nominally raise them, but it fails to tackle the underlying sustainability problem. This is hardly the visionary leadership which Luciano Busuttil and Etienne Grech think their prime minister is endowed with.

On to energy and the environment. While there seems to be no end in sight to the amount of money this government is ready to pour into the insane gas-fired power plant project (for which funding was refused by the European Investment Bank), the alternative budget document released by the Opposition makes it clear that Malta does not need that power station.

The Opposition is right. Because of the (BWSC) Delimara power plant and the Malta/Sicily interconnector, Malta produces more than enough electricity. What it needs now is not to produce more energy by another fossil fuel but to produce the same amount of electricity differently. Malta has an European-Commission-mandated obligation to produce a minimum of 10% of its energy through renewable sources by 2020, and yet it remains far behind.

The 2016 government budget includes a sop to renewable energy, with talk of a small subsidy for people who install a solar panel on their roof-top, but it has no holistic plan. The Opposition’s alternative budget criticises the government’s abandonment of a wind-farm policy, which the previous government would have set in motion if it were not for the Malta Environment and Planning Authority jettisoning the Sikka l-Bajda wind turbines.

The Opposition is, once again, correct in its criticism. It is inconceivable that with access to such a large sea area, Malta is not capable of building a wind farm. While this country prevaricates about renewable energy, other countries are moving steadily on. Germany has its energiewende policy (switching off nuclear and going renewable) and Britain has the largest sea-based wind farms in Europe. The Robin Rigg Offshore Wind Farm in Scotland is a thing of engineering, environmental and, yes, aesthetic beauty.

A wind farm like that offers not only the obvious environmental advantages but also scientific and economic ones. It is a laboratory where lots of exciting research and development can take place, and it is technology and expertise which can be sold. Israel, for example, sells water expertise to dry countries because it has spent years researching reverse osmosis and other hydrology solutions.

Some naysayers will pooh-pooh the idea of an offshore wind farm on grounds of impracticality, but this is not 2003. New-generation equipment now means that there are workable solutions. The first-mover principle applies here. If we fail to invest now, we are not only going to miss the 2020 renewable energy deadline but we are also going to miss another economic bus, something which always seems to happen under short-sighted Labour governments.

The Opposition is putting forward is a revision of the Outside Development Zones philosophy. It is quite clear that Outside Development Zones are not working right now. Suffice to say that The Developers’ Association has welcomed this budget with open arms. Governments and developers view the zones more as a nuisance than an actual policy so a radical re-think is quite in order. Right now, it pays to bulldoze through green zones, even if you have to pay a fine. In Hani Hasan Naji al Salah’s case, he was even offered the zone gratis by the government.

The Opposition wants to give a value to Outside Development Zones so that it pays to keep them intact. The World Wildlife Fund (on a much bigger scale) has, with the Brazilian government, successfully done this through its Amazon Region Protected Area Programme, which is intended to reduce deforestation in the Amazon and keep a part of the rainforest the size of Belgium fully intact. Banks, the government, environmental non-government organisations, private companies and other stakeholders put in funds so that trees are planted, flora and fauna cultivated and land saved.

The Opposition’s alternative budget document deals with other issues, like falling exports and a bureaucracy which seems to be expanding faster than Manuel Mallia’s waistline, despite there being a cabinet post specifically for the “reduction of bureaucracy”.

Overall, Edward Scicluna’s budget is not a bad one, but it is merely perfunctory. A Nationalist-led government might have presented a budget like this some 15 years ago. In 2015, it feels strangely out of date, as if the Finance Minister had spent the weeks leading up to the budget watching old videotapes of John Dalli reading out the budget speech – which causes me to wonder whether he helped write it.

It kicks environmental, economic and demographic sustainability time-bombs into the long grass, which is hardly inspiring or even responsible. But who cares when there’s a trough to pig out on, right?

By allowing this budget to be presented, Joseph Muscat has shown that, in spite of his delusions of grandeur, he is a cowardly leader, and now deeply out of touch already. Even the United States, which still has large problems accepting the existence of climate change (many of its citizens have big problems accepting that the world wasn’t created by God in seven days) and which has doggedly refused to ratify the Kyoto Protocol, and China, which is probably the largest polluter in the world, have come up with some solid green plans this year. Clearly, they left Muscat out of the discussion.

The Opposition’s alternative budget, though, strikes the right notes generally. It definitely needs some work: free school-buses for all children comes across as wasteful, meal vouchers like something from the 1950s, and Simon Busuttil still needs to tell us whether he plans to get rid of the cash-for-passports scheme (some of his people will go down fighting over that one). But still it remains light-years ahead of the government’s.

What it boils down to is this. The government’s budget tries to keep things from sinking. The Opposition’s alternative budget tries to sail into the future. The difference between the Labour Party and the Nationalist Party, in this respect, remains as ever unchanged.